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Court Approves USEB's Settlement with Countryside.

NEW YORK -- U.S. Energy Biogas Corp. ("USEB" or "the Subsidiary"), a U.S.-based renewable energy business, announced today that the United States Bankruptcy Court for the Southern District of New York has approved the settlement agreement reached between USEB and Countryside Power Income Fund (TSX: COU.UN) and announced on January 16, 2007. The approved settlement agreement enables USEB and its parent, U.S. Energy Systems, Inc. (Nasdaq: USEY), to establish new financing for USEB that should enable it to pay all of its creditors in full, exit bankruptcy quickly, and support the growth of the business for the benefit of USEY's shareholders.

"We are very pleased that USEB is continuing on an expedited path through its restructuring," said Asher E. Fogel, Chairman of USEB and Chief Executive Officer of USEY. "The Court's approval of our settlement agreement should facilitate full payment of existing creditors' claims. Moreover, it means that USEB can move forward to establish new financing, its management can capitalize on USEB's attractive growth opportunities, and USEY's shareholders can benefit from the value of USEB."

The settlement provides for Countryside Canada Power Inc, a subsidiary of Countryside, to have an allowed secured claim of approximately US$99,000,000, of which US$3,000,000 has been paid by USEY. Under the settlement, the secured claim is the only allowed claim that Countryside will have in the Chapter 11 case. As a result of the settlement, Countryside has no claim concerning USEB's April 8, 2004 Royalty Agreement with Countryside, nor any claim against USEY under its April 8, 2004 Development Agreement with Countryside.

The settlement provides for USEB to make an installment cash payment of US$30,000,000 against the remaining US$96,000,000 of Countryside's claim on or before March 31, 2007, with the remaining balance of the secured claim due on or before maturity at May 31, 2007. USEB stated that it intends to make the US$30,000,000 installment payment as soon as practicable in order to minimize its interest expenses. Other significant terms of the settlement agreement are described in USEB's January 16, 2007 press release.

Hunton & Williams LLP serves as legal advisor to USEB. Wilmer Cutler Pickering Hale and Dorr LLP serves as special counsel to USEY in connection with USEB's Chapter 11 cases.

USEB's Chapter 11 filing does not include USEB's parent company, USEY, or the parent company's other subsidiary, a UK-based natural gas exploration and development business, UK Energy Systems (UKES). Moreover, neither USEY's nor UKES's operations are affected by USEB's Chapter 11 filing.

The USEB Chapter 11 case number is 06-12827(RDD).

Additional information is available on the Company's website at: http://www.useyinc.com.

About U.S. Energy Systems, Inc.

U.S. Energy Systems, Inc. is an owner of green power and clean energy and resources. USEY owns and operates energy projects in the United States and United Kingdom that generate electricity, thermal energy and gas production.

Certain matters discussed in this press release are forward-looking statements, and certain important factors may affect the Company's actual results and could cause actual results to differ materially from any forward-looking statements made in this release, or which are otherwise made by or on behalf of the Company. Such factors include, but are not limited to, the effect of the USEB's Chapter 11 filing, access to needed financing or refinancing on acceptable terms, our ability to continue as a going concern, revisions in the initial estimates in the fair market value of the acquired assets, failure to realize the estimated savings or operating results of the acquisition, and other risks associated with acquisitions generally, including risks relating to managing and integrating acquired businesses, changes in market conditions, the impact of competition, changes in local or regional economic conditions, and the amount and rate of growth in expenses, dependence on management and key personnel, changes in federal or state laws and their interpretation with respect to regulation, energy policy and other business issues, the inability to commence planned projects in a timely manner, our ability to continue our growth strategy, and the ability to complete acquisitions, as well as other risks detailed from time to time in U.S. Energy's Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the year ended December 31, 2005 as well as the 10-Q for the period ended September 30, 2006. We do not undertake to update any of the information set forth in this press release.
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Date:Feb 5, 2007
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